When Hank Paulson first laid out the logic of the $700bn (£381bn) rescue plan he put it in the following terms. Illiquid mortgage-related securities were “clogging up our financial system” and choking off the flow of credit to the economy.

By taking these unwanted assets out of the banking system the government would allow the banks to liquify their assets, cap their losses, raise new equity and start lending normally again.